Dow futures sink over 250 points, yields rise to 2024 highs

Live2 updates

• Tue, April 2, 2024 at 4:49 AM MST

  Consumer stocks in focus with gas prices on the rise

  Stocks levered to the spending of consumers could become ice cold this spring.

  Oil prices hit $85 a barrel this morning, a five-month high. The advance in oil — which may be starting to weigh on the broader market — has lit a fire under nationwide gas prices. The national average for gas prices of $3.51 a gallon last week was unchanged week on week — that after prices rose for four straight weeks.

  Even still, gas prices were up 16 cents from a month ago.

  “While we seem to be nearing a short-term peak, one word of caution for those in the Mid-Atlantic and Northeast: you haven’t yet finished the transition to summer gasoline, so you may experience some sticker shock in a few weeks. Be prepared for somewhat of a punch. For the rest of the nation, so long as we don’t see extenuating circumstances, we’re likely close to a top in prices. Let’s hope it pans out and sticks!” said Patrick De Haan, head of petroleum analysis at GasBuddy in a new blog post.

  As gas prices have risen, the Consumer Discretionary Select Sector SPDR Fund (XLY) has dropped 1.4% the past month – perhaps on fears of consumer spending. Key discretionary retailers in the fund such as Amazon (AMZN), Starbucks (SBUX) and Nike (NKE) have relatively under-performed the S&P 500 in the last month.

  Interestingly, Walmart’s (WMT) stock is up 2% in the past month as investors view the retailer as a trade down play on higher gas prices.

• Tue, April 2, 2024 at 4:30 AM MST

  Health insurer stocks tank

  Health insurer stocks are being sent to their sickbeds on Tuesday.

  Humana (HUM) is getting drilled by 9% pre-market, with pressure also being seen on UnitedHealth Group (UNH) and Cigna (CI). The sell-offs come as US regulators failed to increase payments for Medicare Advantage plans in line with Wall Street estimates.

  Payments will rise by 3.7% on average in 2025, down about 0.2% year-over-year.

  Long-time healthcare analyst Lisa Gill at JP Morgan said in a client note that came as a “surprise”, as many on the Street expected an increase “given the utilization environment.”

  Humana is seen as the most exposed to the decision from the Centers for Medicare and Medicaid Services.

  Key call-out from Humana’s latest annual report:

  “At December 31, 2023, we provided health insurance coverage under CMS contracts to approximately 5,408,900 individual Medicare Advantage members, including approximately 851,300 members in Florida. These Florida contracts accounted for premiums revenue of approximately $14.9 billion, which represented approximately 19% of our individual Medicare Advantage premiums revenue, or 14% of our consolidated premiums and services revenue for the year ended December 31, 2023.”

  RBC analyst Ben Hendrix said in a note this morning Humana’s profit guidance will have to be reset in the wake of the decision and the stock could stay under pressure. Conversely, Hendrix is recommending to clients to buy Cigna shares on the pullback.